Types of investments to reach your financial goals

There are many different ways to access investment funds, for example, through products such as an Individual Savings account (ISA) or your workplace pension.

Think of the various types of investments as tools that can help you achieve your financial goals.

Each broad investment type, from bank products to stocks and bonds, has its own general set of features, risk factors and ways in which they can be used by investors.

It’s important to remember that the price and value of investments and income derived from them can go down as well as up, and you may not get back the amount originally invested. You should obtain professional financial advice before making any investment decisions.

1) Direct investments

Shares: Shares offer you a way of owning a direct stake in a company – also known as ‘equities’. Their value rises and falls in line with a number of factors which might include the company’s performance or outlook, investor sentiment, and general market conditions.

2) Investment funds (indirect)

Unit trusts and Open-Ended Investment Companies (OEICs): Funds managed by a professional investment manager. There are lots of different strategies and risk levels to choose from, and they can invest in one or more different asset classes.

Investment trusts: Investment trusts are companies quoted on the stock exchange whose business is managing an investment fund, investing in shares and/or other types of investment. You invest in the fund by buying and selling shares in the investment trust either directly or through the products listed in the next table. Once again, there are lots of different strategies and risk levels to choose from.

Insurance company funds: Investment funds run by life insurance companies. When you invest through an insurance or pension product, you often choose how your money is invested. The choice might be from the insurance company’s own funds or investment funds, such as unit trusts, run by other managers.

Tracker funds: Some investment funds adopt a ‘tracker’ strategy. The value of the fund increases or decreases in line with a stock market index (a measure of how well the stock market is doing). Tracker funds often have lower charges than other types of fund.

REITs: These are a special type of investment trust that invests in property. Similar OEICs are called ‘Property Authorised Investment Funds’ (PAIFs).

3) Investment products (indirect)

Stocks & Shares ISAs: A tax-efficient way of investing in shares or investment funds, up to an annual limit. Many unit trusts and OEICs come pre-packaged as ISAs. Alternatively, you can choose for yourself which investments and funds to put in your ISA.

Workplace pension: A way of investing for the future, with a contribution from your employer and tax relief from the Government. Your money is invested in pooled funds.

Personal pension: A way of investing for the future, with tax relief from the Government. You can use it instead of or as well as a workplace pension. Your money is invested in pooled funds.

Investment Bonds: A life insurance contract that is also an investment vehicle. You invest for a set term or until you die.

Endowment Policies: A life insurance policy that is also an investment vehicle. It aims to give you a lump sum at the end of a fixed term. Often you choose which investment funds to have in your policy.

Whole-of-life Policies: A way of investing a regular amount or a lump sum as life insurance. It pays out on death and is often used for estate planning. Often you choose which investment funds to have in your policy.

Independent financial advice

It can be hard to plan for tomorrow when we’re busy living for today, but if you begin planning and saving now you’ll have more options in the future.

Our independent financial advisers can help you devise the correct investment and saving strategy to allow you to enjoy the lifestyle you want when you retire.

Click here if you would like to speak to one of our advisers.